credit card usage

Nora Dunn is a former CFP who sold everything she owned, including her business, in 2006 to travel the world. While she’s never looked back and has been having a blast as a professional hobo ever since, Dunn still needs to travel in a financially sustainable manner.

A large part of her strategy? Using credit cards responsibly. I recently caught up with her during an internet-connected travel moment, and picked her brain about the practice of using credit cards in a way that makes good financial sense.

Tips For Using Credit Cards Responsibly: Advice from Nora Dunn

What Are Some Examples That Illustrate When Using Credit Cards Is A Good Idea?

First, using a credit card and paying it off in full each month helps you to build a great credit rating, which comes in handy when applying for loans and mortgages. The last time I took out a loan to buy a car, I received all sorts of special concessions and security deposit waivers by virtue of having an excellent credit rating.

Second, consistent credit card usage also can be handy for providing a good account of your spending habits. It’s considerably more traceable than paying with cash and wondering where all your money went at the end of the month.

However, my favorite reason for using credit cards (somewhat religiously) is for the accumulation of frequent flyer miles, which for me has been a way to reduce my full-time travel expenses drastically (and even experience a little business class treatment).

What Are Some Fees That People Should Watch Out For?

If you take out a cash advance with your credit card, interest accumulates from the day you withdraw the funds. This might come as a surprise if you’re expecting the same 20 plus day interest-free grace period that you receive on purchases.

Also, if you leave the country and buy things in foreign currencies, expect to pay a currency conversion commission of approximately two and a half percent. But if you know what to look for, you can find a credit card with no foreign transaction fee, and save a ton on travel.

What Should People Look For When Shopping For A New Credit Card?

What to look for in a new credit card depends on your needs. I like cards that have a rewards program of one sort or another, and my favorite type of reward is of the frequent flyer mile ilk (for obvious reasons). [Editor’s note: Take a look at our list of credit card benefits]

What Would You Say Are The Most Common Credit Card Mistakes People Make?

Carrying a balance on credit cards – especially high-interest department store cards – is one of the biggest mistakes you can make. I don’t consider my credit card a license to print money that I don’t have. Instead I use it in a similar manner to a debit card: only if there’s enough money in my bank account to cover the expense.

So There You Have It

Nora’s advice sounds an awful lot like the credit card gospel that I tend to preach, which makes me feel a lot better. At the end of the day, credit cards are tools to be used appropriately, and it always pays to respect their pitfalls.

Using credit cards as a convenience, to accumulate rewards, and to pay for travel expenses can save you a ton of money in the long run. But accumulating too much debt or not paying your bills on time can bring all those benefits crashing down around you.

This was a guest post written by Jake at Nerd Wallet. NerdWallet.com is a site dedicated to educating consumers about proper use of credit cards.